How ETF trading works and why market timing matters. Learn how placing orders after market hours can turn expected profits into losses and how limit orders help reduce risk
Worried that prices might change drastically, Ramu quickly opened his trading app and placed an order to sell all his silver ETF holdings. He expected to lock in the Rs 2,000 profit. But the order status showed “pending.” Confused, he called a knowledgeable friend who explained that orders placed after market hours cannot be executed immediately. Instead, they are processed once the market opens again the next morning at 9:15 am.When the market reopened the next morning, silver prices had moved sharply. As a result, Ramu’s expected profit disappeared and he ended up losing around Rs 1,000. His order was executed at 9:40 am, and the amount credited to him was about Rs 19,000. Shocked, Ramu wondered how he could lose money when he had already seen a profit earlier.His friend clarified that in stock markets and ETFs, the execution price—the price at which the order actually gets completed—determines the final profit or loss. Since silver prices had fallen by the time Ramu’s order was executed, his profit vanished. Had the price increased instead, his gains could have been even higher. His friend advised him to trade carefully during market hours, as price movements after hours can be unpredictable.This example is only a fictional story, but many investors face similar situations due to a lack of understanding. To manage such risks, traders can place a limit order instead of a regular order. A limit order instructs the system to sell only if the asset reaches a specified price. If the market price does not match or exceed that limit, the order will not be executed. This helps investors avoid unexpected losses.Sometimes, a limit order may remain pending if the price does not reach the specified level. It can stay active until the market closes or until the investor cancels it manually. Brokerage charges are usually applied only when an order is executed, not when it is cancelled. Experienced investors also factor brokerage costs into their calculations before booking profits.Orders placed on weekends or market holidays are executed on the next trading day when the market opens. Like all stock market investments, ETFs carry risks. The more investors understand market behaviour, price trends and trading mechanisms, the better they can manage those risks. (Disclaimer:This content is for informational purposes only and should not be considered investment advice. Investors should consult a certified financial advisor before making any investment decisions.)
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Ramu noticed that many of his friends were making profits by trading gold and silver ETFs. Curious to try it himself, he opened a demat account through his bank and began exploring the ETF section on his mobile trading app. He learned that the market operates from 9:15 am to 3:30 pm. Around 10 am, Ramu invested Rs 20,000 in a silver ETF, and his order was executed immediately. Excited by the smooth transaction, he felt confident about his first investment.
